Thailand dipped to deflation in the first month of the new year thanks to sliding fuel prices but core inflation rate rose, helping push the currency higher.

The Thai baht traded near the three-month high it touched last week.

The headline consumer price index fell 0.41% in January from a year ago, compared to a 0.6% rise in December, and it dropped 0.59% month-on-month.

Data show that Thailand had last fallen into deflation in September 2009 and that too was owing to falling energy prices.

USD/THB fell to 32.65 from 32.78 on Monday, close to last week's low of 32.49, which was the baht's strongest since late October.

The Thai Commerce Ministry said the country fell to deflation because of lower retail fuel prices as well as electricity charges and the drop in fresh-food products.

Most analysts had been expecting deflation in Thailand this month, but at a lesser rate.

Core inflation in Thailand rose to 1.64% from 1.58% and sequentially the rate was 0.16% compared to 0.115% in November.

The commerce ministry has maintained its 2015 inflation target of 1.8%-2.5%, based on an assumption of global crude prices holding a range of $90-$110.

The government also cited GDP growth of the country should range between 3.5%-4.5% and USD/THB at 32-35 for its inflation estimates.